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In order to help your clients control the costs of their health care in retirement, one of the best solutions is life insurance. No other product available to consumers offers the same amount of flexibility, tax-advantaged status and ability to tailor both coverage and growth to meet individual clients’ needs.

Investors are becoming increasingly concerned about how they will be able to fund their health care in retirement. And why shouldn't they be? With the news reporting daily on an increase in overall insurance rates, or pension recipients losing their health coverage, or how
many physicians may or may not be leaving their line of work, it seems the average client has some serious concerns. Even more frightening, how many of these clients are receiving any help in planning for these costs?

According to a survey conducted by SunLife, it is less than 10 percent.

There are two key, specific plans in Congress that are currently being debated in the media today concerning how to change health care costs for retirees. Unfortunately, it seems that these changes may not be for the better.

The first change comes from the hotly debated 2014 presidential budget. The budget is asking for an overhaul of how Medicare is
means-tested. Right now, Medicare Parts B and D are based on a person's (or couple’s) total income. The more income that is reported, the more someone will ultimately pay for coverage.

The current Medicare means-testing brackets are as follows:

For individuals earning

For couples earning

Part B

Part D

$85k <

$170k <

N/A

N/A

$85k - $107k

$170k - $214k

35%

Premium + $11.60

$107k - $160k

$214k - $320k

50%

Premium + $29.90

$160k - $214k

$320k - $428k

65%

Premium + $48.30

$214k +

$428k+

80%

Premium + $66.60

The 2014 budget is calling for the same income levels (starting at $85,000 and ending at $214,000 for individuals), but is also
levying four new penalty brackets and increasing overall surcharges, as well. As it stands, the proposed changes are
as follows for 2017:

For calendar years 2017 and later, if the modified adjusted gross income (single beneficiary) is:

For calendar years 2017 and later, the applicable percentage is:

More than $85,000 but not more than $92,333

40.0%

More than $92,333 but not more than $99,667

46.5%

More than $99,667 but not more than $107,000

53.0%

More than $107,000 but not more than $124,667

59.5%

More than $124,667 but not more than $142,333

66.0%

More than $142,333 but not more than $160,000

72.5%

More than $160,000 but not more than $178,000

79.0%

More than $178,000 but not more than $196,000

85.5%

More than $196,000

90.0%

The second change is from the Bipartisan Policy Center (BPC), a think tank created in 2007 by members of Congress, as well as the
Congressional Budget Office (CBO). The CBO was designed to tackle several major issues at hand for our country — and they are now calling for a change in how Medicare is means-tested.

Instead of increasing the penalties or instituting new brackets in the current system, the BPC is calling for a decrease in the income
brackets by at least 11 percent and as much as 47 percent. The good news is that the penalties themselves will remain the same. Currently, the proposed changes are:

Single

Couple

Premium

25%

$60,001 - $82,000

$90,001 - $123,000

35%

$82,001 - $135,000

$123,001 - $202,500

50%

$135,001 - $189,000

$202,501 - $283,500

65%

>$189,000

>$283,500

80%

Now that we've gotten the background out of the way, we can ask the question, "How will these proposed changes impact your clients?"
Instead of the 11 percent of investors who are currently being impacted by this surcharge, under the BPC plan another 11 percent of investors who are retired will be subject to these higher Medicare premiums, thus putting strain on even more of your clients’ financial
plans.

As for the President’s budget, in theory it will still only affect the original 11 percent of retirees, but those 11 percent will not only face higher premiums, but they will also face lower Social Security benefits and higher taxes, as well — factors which their current financial plans most likely do not take into account.

However, there is another pressing concern. As it stands, certain Medicare premiums (Part B) and all surcharges are automatically deducted from a person’s Social Security benefit. This will ultimately lead to even more investors having less access to income in retirement (and an increased tax bill, as well). The other caveat (which does lead to a direct solution for those that have time to plan) is how Medicare defines what income really is. According to SocialSecurity.gov, the income that is being used to determine what your clients will be paying for their health care premiums is “the adjusted gross income plus any tax exempt interest or everything from lines 37
and 8b of the ORS form 1040.”

And therein lies the solution. How are clients supposed to control their out-of-pocket health costs? Which investment or product is not included in lines 37 or 8b? Well, right now there are only a few alternatives, but two of the most popular are Roth accounts and life insurance.

Surprised? Don’t be.

In order to help your clients control the costs of their health care in retirement, one of the best solutions is life insurance. No other
product available to consumers offers the same amount of flexibility, tax-advantaged status and ability to tailor both coverage and growth to meet individual clients’ needs.

About the Author

Dan McGrath, author of "What you don't know about retirement will hurt you!” is the country's leading expert on how the high costs associated to healthcare will impact retirement, Social Security and the overall economy.
Mr. McGrath is the Co-Founder of both Jester Financial Technologies, whic... More